$1 billion
This is the revenue target for a number of larger U.S. and Canadian cannabis companies over the next few years – and for some, they’re projecting it for as early as next year.
That’s quite a target when considering these companies’ recent earnings reports included relatively small revenue, but it likely signals ever greater consolidation in the industry as some companies look to achieve that lofty target through acquisitions.
Organic growth will also contribute to reaching those revenue heights and some may still seek financial support from more established industries like tobacco and alcohol to boost revenue.
Here’s a quick overview:
Harvest Health & Recreation, which agreed to acquire Verano Holdings for $850 million, reported fourth-quarter 2018 revenue of $16.9 million. According to CFO Leo Jaschke, such a figure represents a “strong 52% increase from Q3 revenue of $11.2 million.”
Jaschke went on to say the company is predicting 2019 pro forma revenue of between $350 million and $400 million and that “preliminary guidance for 2020 is for pro forma revenue of $900 million to $1 billion.”
Organic growth from existing operations will make up about 60% of that $1 billion revenue target, President Steve Gutterman told Investor Intelligence, and about 20% will come from the Verano acquisition.
The rest is expected to come from other purchases, including April’s CannaPharmacy deal, Gutterman said.
“There is also potential upside to this if other states go rec or we do additional M&A,” Gutterman added.
Chicago-based Cresco Labs – which in April said it will acquire Canada’s Origin House, a distributor with dominant market share in California – is looking at a similar $1 billion revenue target, albeit a year later in 2021, as it continues on its acquisitive path. The company reported net revenue of $17 million in Q4 2018, more than quadruple the previous year. Full-year 2018 revenue was $43.3 million.
In Canada, Canopy Growth looks to achieve the $1 billion mark in 2020, albeit in Canadian dollars.
“We are confident in their ability to achieve the previously communicated run rate of (CA)$1 billion next year,” Bill Newlands, CEO of Constellation Brands, told a results conference call in early April. Canopy closed an investment of 5 billion Canadian dollars ($3.8 billion) from Constellation earlier this year.
Canopy reported revenue of 132.29 million Canadian dollars ($97.9 million) in the nine months to Dec. 31, 2018.
And Curaleaf, which said May 1 it will buy Cura Partners, reported pro forma revenue of $205 million in 2018 – based on revenue of the two companies combined.
Curaleaf wouldn’t provide its revenue projections after the Cura deal announcement, but it is clear the company is also confident such further industry consolidation will help expand revenues precipitously.
“We are very excited there is a lot of green field in front of us to drive growth,” Curaleaf President and CEO Joseph Lusardi said on a conference call the day of the acquisition.
